Conflict of Interest between Owners and Operators Essay

Conflict of Interest between Owners and Operators - Essay Example This paper examines the nature of the duty to avoid a conflict of interest on the part of owners and operators in company law. This research, however, is industry based and focuses on the nature of that duty in the gas and oil industry. In this regard, the nature and legal consequences of oil and gas agreements are examined. Once the various methods for engaging oil and gas contracts are explained, this research then turns its attention to the law relative to the corporate duty to avoid a conflict of interest and how that duty is interpreted and applied by the courts. The duty is then tied together with the owner and operator of the oil and gas industries. It is a common principle of company law that directors are required to put the interest of the company first and to avoid situations in which there is not only a conflict of interest but that there is a possibility of a conflict of interest. This rule is generally treated by the courts as entirely inflexible. As such it places upon the operator in an oil and gas agreement an onerous and quite often insurmountable burden as these persons are almost always involved in situations where there is a possibility of a conflict of interest. However, some court judgments such as Bray and Ford have relaxed the inflexible rule, holding that not all transactions are necessarily improper or illegal. This ruling could ease the unrealistic burden on operators who quite often come into contact with persons and entities that might have an interest that calls upon the operator to exercise a duty that might conflict with the oil and gas company whom he/she represents and serves.